So why does this matter? Well, the JOBS Act was ostensibly designed to make it easier to launch actual IPOs, and theoretically should have made the darker, more problem-ridden reverse merger process less appealing. But what we're finding now is that companies are using the JOBS Act to designate those "blank check" firms as "emerging growth companies." From the WSJ piece:
The Act… also allows [emerging-growth companies] to make fewer financial disclosures, use a new, confidential SEC review process for IPOs and lets their bankers communicate more freely with potential investors. The confidential reviews are designed to let companies sort out any differences with the SEC behind closed doors.
Many of the hundreds of companies that have claimed to be emerging-growth companies under the new law are small biotech, technology, retail and energy companies. But 17 explicitly described themselves as blank-check companies or trusts.
About 30 companies have submitted IPO filings to the SEC confidentially under the law, according to the agency's staff. And at least two of those submissions are for blank check companies, an advisor to those companies said.
These little reverse-merger enterprises are exactly the sorts of companies where small investors should want to have as much transparency as possible, so they know whom they're jumping in bed with. Instead, we're going to use this new tool to allow already-troubled companies to hide their warts in behind-closed-doors sessions with the SEC. So that's awesome.
Full article here: JOBS Act Fallout: More Fraud, Fewer IPOs | Matt Taibbi | Rolling Stone.
